AES’ shares are still cheap at less than 11 times earnings. But all of a sudden, they’ve become a hot commodity, returning nearly 15 percent in a down year for the DJUA. And ironically the primary reason is emerging market exposure.
The catalyst: An unfolding bidding war for AES’ 17 percent stake in Brazilian electric utility Electropaulo. When the company announced its intention to exit its ownership interest, Brazil exposure was considered a liability.
Now two of Europe’s biggest utilities—Enel SpA (Italy: ENEL, OTC: ENLAY) and Iberdrola SA (Spain: IBE, OTC: IBDRY)—are bidding against each other for AES’ piece. Iberdrola’s current bid is already nearly 15 percent greater than what Enel originally offered, and it looks like neither side is done.
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